Avanci bringing harmony to 5G patent licensing for vehicles

Avanci appears to have pulled off the impossible by bringing heated industry and geopolitical rivals – including Qualcomm, Ericsson, Nokia, Huawei and InterDigital – under the same roof. In a brief release, the company announced its new 5G patent pool includes participation from the vast majority of top global 5G patent holders.

However, its pool is intended for connected cars and not smartphones or Internet of things (IoT) gadgets. Avanci's first 5G licensee is automaker Mercedes.

"Today's announcement is a milestone," wrote Florian Mueller, an intellectual property expert who maintains the Foss Patents website. "In order for autonomous driving (which will, of course, have limitations for many years to come) to materialize, connectivity is key, and the advantages of 5G are not just related to bandwidth, but 5G also reduces latency. Ideally, car makers and their suppliers will focus on innovative applications – and cross cellular SEP licensing off of their to-do lists, for the most part at least."

SEP stands for "standard-essential patent," and companies building 5G gadgets must obtain licenses to those patents in order to legally sell their products. For many, the negotiation process to obtain such licenses is decidedly difficult. For example, iPhone maker Apple and Ericsson engaged in a year-long, globe-spanning patent licensing battle before finally announcing a settlement late last year. They didn't release the terms of their deal, but some financial analysts estimated their cross-licensing agreement could ultimately funnel up to $400 million annually from Apple to Ericsson.

Those kinds of one-off licensing deals are relatively common in the smartphone industry. But Avanci has worked to smooth the situation for automotive companies by collecting licenses from virtually all of the market's major cellular patent holders. The company then can offer that patent package to automotive companies, thereby allowing them to sidestep the potentially arduous process of inking individual, one-off agreements with each main 5G patent holder.

Avanci already operates that kind of patent pool for 4G, and this week it announced a similar pool for 5G technology.

Joining the pool

Avanci's 4G pool is fairly comprehensive. But with its 5G pool, it added yet another major name: Huawei.

"The most famous new licensor (not only of Avanci 5G but also 4G) is Huawei," wrote Mueller, of Foss Patents. "They have a huge and powerful portfolio of cellular SEPs (the 5G leader by some measure)."

Added Mueller: "The involvement [in Avanci] of Huawei, China Telecom, and other Chinese entities as well as Sharp (Japanese, but owned by Foxconn) seems very significant in geopolitical terms. It would now make a lot of sense for Chinese car makers to take licenses."

According to one estimate, Avanci's pool covers roughly 80% of 5G patents.

Huawei, for its part, has recently expanded its patent licensing business in the pursuit of more revenue. The company said its patent-licensing operation totaled roughly $560 million last year.

"Huawei takes a balanced approach to patent licensing. We believe reasonable royalty rates will incentivize both the creation and adoption of innovations," said Huawei's Alan Fan, head of the company's Intellectual Property Rights Department, in a release.

Huawei joins the likes of Qualcomm, Ericsson, InterDigital and others in loudly pursuing revenues from patent licenses.

Setting the price

"We ensure that the work of thousands of inventors around the world is recognized and rewarded. At the same time, by simplifying technology access, we enable companies to build exciting new products that are improving the lives of people across the globe, every day," explained Kasim Alfalahi, Avanci's CEO, in a release.

Avanci is initially charging $29 per vehicle for its 5G patents. That price will rise to $32 early next year. And it's an increase from the $20 per vehicle it now charges for 4G. Avanci counts more than 130 million connected vehicles, from more than 80 automotive brands, in its 4G program.

Avanci's prices are noteworthy in comparison to what other companies charge for their 5G patents on smartphones. For example, Huawei said it charges around $2.50 per 5G phone for its patents. In 2017, Ericsson said it would charge $2.50 to $5 per phone. Sisvel charges $0.50 per gadget for its 5G patent pool. Nokia wants $3.50. And Qualcomm believes it could get up to $16.25 in royalties for every 5G phone sold.

But, according to Avanci, there's a clear reason for automakers to pay for access to its patent pool. In a report commissioned by the company, analysts at Tech Insights estimated that car dealers can expect $300 extra per car thanks to 5G, due to higher sales prices and higher residual values.

"5G connected cars will come equipped with the most sophisticated sensor and diagnostic systems, enhanced processing and storage capacity, and faster on-board networks. These advances make a car that is more 'intelligent,' with built-in artificial intelligence and cloud access that enable it to update and evolve the capability of on-board systems. This intelligence sets the stage for a car company to add value to a 5G connected car post-sale, via over-the-air updates driven by the aggregation of insights gleaned from thousands of similarly networked vehicles," according to the report.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano